China property: Moody’s downgrades Longfor’s credit rating to below investment grade
- The credit ratings agency downgraded Longfor from ‘Baa3’ to ‘Ba2’ as it expects the developer’s condition to deteriorate across the board
- An upgrade of Longfor’s rating is unlikely because of the negative outlook, Moody’s says
Moody’s has stripped mainland Chinese developer Longfor Group Holdings of its investment-grade credit ratings, citing a negative sales outlook because of sluggish home sales and funding conditions.
The credit ratings agency downgraded Longfor, one of the top 10 mainland Chinese developers by sales, from “Baa3” to “Ba2”.
“The rating downgrades are driven by our expectation that Longfor’s contracted sales, credit metrics, financial flexibility and liquidity buffer will decline over the next 12-18 months amid a volatile market and funding conditions,” Kaven Tsang, a Moody’s senior vice-president, said late on Wednesday in a statement.
“The negative outlook reflects the high uncertainties over the company’s ability to recover its contracted sales, credit metrics and access to debt capital markets over the next six-12 months,” added Tsang, who is also Moody’s lead analyst for Longfor.
Given the negative outlook, an upgrade of Longfor’s rating is unlikely, Moody’s said.
The credit rating cut comes as official data showed home prices in China fell at a faster pace in October amid an economic downturn, despite stimulus measures launched by Beijing in late August, from cutting mortgage rates to lowering thresholds for first-time buyers.